Fitch Lowers Outlook on Honeywell

Fitch said Honeywell's $1.2 billion purchase of the Oak Brook, Ill., safety equipment maker is likely to be financed using cash and debt. Any additional debt used to fund the purchase will increase Honeywell's financial leverage, which Fitch already considered to be high.

"The pending acquisition can be expected to temporarily delay an improvement in Honeywell's credit measures," Fitch said. "Future rating actions will depend on Honeywell's deployment of its substantial free cash flow to reduce debt and control leverage."

A downgrade to the company's ratings could be considered if Honeywell is not able to meaningfully reduce leverage over the next 12 to 18 months, Fitch said.

Honeywell's issuer default rating is currently "A+." Its senior unsecured bank credit facilities and senior unsecured debt are also rated "A+." Honeywell has a short-term issuer default and commercial paper rating of "F1."

Fitch said concern over Honeywell's leverage is partially offset by the company's solid operating performance and cash flow. Additionally, Fitch said the Morristown, N.J.-based company has sufficient financial capacity to rebuild its credit measures after the acquisition closes.

Last week, Honeywell, which also has business segments in aerospace and transportation systems, said it planned to buy Norcross to expand its line of personal protective gear.

Honeywell shares slipped 2 cents to $58.25 in morning trading.